On January $1$ of the current year, Sidelines Company purchases equipment with an estimated $6-$year useful life by making a $$9,800$ cash payment and issuing a noninterest$-$bearing note for $$33,600$ due in two years. The fair value of the equipment is unknown. An $11\%$ annual interest rate is typical of this transaction. The company uses the effective interest method to amortize any discount on note payable and the straight$-$line method to determine depreciation expense.

Required

a$.$ Prepare the entry to record the purchase on January $1$ of the current year.

b$.$ Prepare the entry on December $31$ of the current year to record $(1)$ interest expense and $(2)$ depreciation expense.

c$.$ Indicate what should be reported on the balance sheet related to this transaction as of December $31$ of the current year.

d$.$ Prepare the entry on December $31$ of the next year to record $(1)$ interest accrual $(2)$ cash payment, and $(3)$ depreciation expense.

e$.$ Assume instead that Sidelines exchanged $700$ shares of its own $$10$ par value common stock along with $$9,800$ cash for the equipment. At the date of the exchange, the stock was actively trading in the market at $$40$ per share. Prepare the entry to record the purchase of equipment.